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tv   Nightly Business Report  PBS  August 13, 2013 6:30pm-7:01pm PDT

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this is night by business report with tyler mathisen and susie gharib brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures, viking river cruises, exploring the world in comfort. grounded, the department of justice wants to stop the mega merger between u.s. airways and american airlines. does this mark the end of consolidation in the industry? and what does it mean for you, the traveler? >> following the money, carl icahn tweets about a 1 billion-dollar stake in apple and the stock takes off.
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j.c. penney shares worth $350 million less than he paid. can he make money? >> and supersized hospitals are getting better, changing the economics of healthcare, but will the trend mean higher bills for you? all that and more tonight on "nightly business report" for tuesday, august 13th. and good evening everyone. buckle your seat belts and make sure your trey tables are upright and locked that planned 11 billion-dollar merger between american airlines and u.s. air hit an air pocket today courtesy of the u.s. justice department. eric holder and six state attorneys general soon to blocked merger says the deal will stifle competition after a wave of airline competitions in recent years. says the government says it could lead to bigger prices. shares of u.s. airways falling 13% day and amr corp, which is currently in bankruptcy but
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trading nose dived a staggering 45%. hampton pearson has more on the suing and what it might mean for the few tear for the merger. >> reporter: at the airport across from the justice deputy, anti trust department says they would have 69% of the take off and landing spots. that says the justice department is an air travel snap soft of the harm to consumer ifs american airlines and u.s. air are allowed to create the largest airline with 6700 daily flights serving 56 countries and revenues of $40 billion. assistant attorney general for andy trust william bears say we. consumer advocates are cheering
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the government lawsuit. >> there were no benefits for consumers in this merger, only benefits for the airlines. on a net basis, consumers got new new destinations and we lost competition across the country. >> the crackers? okay. >> reporter: they will fight the justice department, a joint statement from u.s. air and amr reads in part we will amount a vigorous defense and pursue all legal options to achieve the merger and deliver the benefits of the new american to our customers and communities as soon as possible. the stocks of both airlines were hit hard on the news. analysts say it's a shock to an industry that profited from the previous mega mergers involving delta, u nignited and southwest. >> it does not look good. they have to litigate it to the death and maybe experience the death of the deal that way. >> reporter: barring a settlement, the looming court
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battle could determine if the wave of airline mega mergers that began in 200 8 is over. i'm hampton pearson at regan international airport. our guest says this could be the end of the airline merger. airline consultant of airline aircraft projects. what puzzled a lot of people today, craig, united, continental, southwest, airtran. what changed here? what is your thinking? >> i think what really changed is that if you go back a few years ago, airlines were going into chapter 11 bankruptcy and the interest of the consumer in a stable, viable airline industry were having the interest of investors and shareholders, and what has happened in the past -- in
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really the recent past is the airlines are doing much better, and so to answer the question, what has changed, what has changed is there is maybe a somewhat of a diverse where the consumer is interested in not seeing higher fairs, whereas airline investors want higher fairs. >> mr. jenks what do you think? do you think they will reach a settlement and the deal will go through or not? >> i think it's 50/50. the justice department is playing hardball here. it's a very strong case that doesn't -- on the face of it show a way out, but it may be that the -- that they will agree to some kind of a deal down stream. >> and here is another question along those lines, does american
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airlines survive a big part of the restructuring plan to get out of bankruptcy, can american airlines stand on its own? >> american very likely can stand on it own but it would be somewhat less viable and profitable. >> what do you think happens to airfares if anything in light of this lawsuit? do they not rise as quickly as they otherwise might? do they decline a bit? what happens? >> the situation over the merger will not in itself impact fares short time but if it is prevented, there is probably some truth in the view that fares would be more checked than if the merger goes through. >> all right. craig, thank you so much. craig jenks, airline consultant.
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more green than red in the stock market, all the major averages posted modest gains reversing losses on worries about higher interest rates from the federal reserve. the official speaking up about policy moves, this time den in this case lockheart saying it was too early to say when the central bank would ease back and likely happen before the end of this year. investors were encouraged to buy stocks on a healthy reading on retail sales up 2/10ths of a percent. the dow rose 31 points, the nasdaq up 14 and the s&p 500 adding four. what a day it was for activist investors. several making news today and impacting the markets big time. carl icahn saying he has a large stake in apple, reportedly a billion dollars and the stock is under valued and says he spoke with apple's ceo tim cook
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discussing a larger stock buy back program. for it's part it appreciates the interest and the investment of shareholders and discussed the conversation positive. the market reaction to icahn was strong. shares spiking around the time of the tweet, you can see it on the chart there 2:21 eastern time adding $10 billion worth of market value from that point until closing at 4:00 p.m. shares ending up 5%, one of the best days in months but look here at the spike in value, with just about 10 million shares trading in the final hour alone. now a letter from another activist investor group had a bigger impact on shares of men's clothing retailer. beacon light capital that owns more than 1% of the chain wrote the retailer says shares are under valued and calling for a stock buy back. it also wants changes to the bored of directors.
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investors like what they heard. shares of joseph a banks surged 12.5%. bill acre man is out at j.c. penney and says although he's leaving the bored. it's a win for the struggling retailer because he was able to raise concerns about troubles at the chain. so what does it all mean for penny's future? courtney regan has more now. >> reporter: it's been a rough 18 months for j.c. penney and the drama is far from over. bill ackman resigned, a move that's surprising after the hedge fund manager sent two letters advocating for number of executive changes, including the replacement of the bored chairman thomas and a speedy search process. as akman resigns, j.c. penney
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and former department store ron tyso will replace akman on the j.c. penney bored with a yet to be named bored member. akman may no longer have a bored seat but with 18%, one of the largest investors. it's worth half the $18 billion and because akman has privy information he can't sale shares at this time. many believe his resignation removes some leadership uncertainty but doesn't solve the issues of poor sales and low traffic in stores. those continue to be j.c. penney's biggest problems. >> i don't think many consumers that shop at j.c. penney are paying much attention to the paid in place or as the world turns aspect of this story. i do think they are paying a lot of attention to what products in the store, what pricing looks
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like, what the feel of the store is like and what the competition is doing. >> reporter: mike olman stabilized j.c. penney's financial situation, keeping the ship afloat. moving that vessel forward is another issue. so when j.c. penney reports earnings a week from today, how the retailer plans to reinvigorate shoppers is the burning question. even more sew the closer the calendar moves to the important holiday season. for "nightly business report" i'm courtney regan. >> so are activist investors good for companies and shareholders? kate kelly joins us with a look at the impact some investors have on companies. kate, they make a lot of noise and headlines. who has a good track record and who doesn't? >> take david inhorn with a successful battle with apple, which we mentioned earlier in
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context with carl icahn. he won the battle and got what he wanted, however, the stock is not doing that well this year so his envestment is not up year to date. that's an example where you have a short-term victory but longer term investment play hebra life, since then the stock has gone up and benefits carl icahn and other people on the long side. it's often a mixed bag, even if you get what you wanted to do in the first place you may or may not see results. dan with sony, so far refused to spin out the entertainment business but the stock on a tear this year. >> a lot of stocks icahn holds or bought recently, they are up this year -- >> that's right. we seen triple digit upside for some -- >> netflix. >> netflix, web md, hebra life.
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he's had a great touch. >> one thing that worries me, forgive me, if you try to come behind them, you never know when they are selling. they don't tell you. >> that's definitely an issue. >> unless icahn decides to tweet again. >> he's embracing new technology. harvard law school among others put together a study where they looked at a 15-year period with a number of stocks and looked at these stocks right before the activist announcement during and for five years. what they fought was when activist come in, it rises 6% and continues. >> so should investors followhe? >> there is a 6% pop and from a performance level companies that are under performing before the activism began, which is why you have activist in the first place improved businesses and compared
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to peers and you do see a long-term gain. there is va rasty to the idea that activists are picking good stories under valued. >> fascinating stuff. thanks a lot. still ahead, supersized hospitals, the sector is being hit by mergers but will the recent trend drive up the cost of care for you but first, some of the most widely held stocks closed today. picture this, a 100-foot sink hole swallows a resort outside of disneyworld and a day after the earth opened up, there
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is questions about the safety of homes across the state and how it will affect the housing recovery. diana olick has more from florida. >> reporter: engineers with drills rolled into summer bay as developers here assess the damage and try to make sure the other 52 buildings in this report are safe. >> we expect insurance people and our adjustors to be here today to start work. it's too early to say what will happen. >> reporter: the building is a total loss but they will continue to develop this area, even though it's prone to such sink holes. across central and western florida there are more than 19,000 known sinkholes and likely more unknown. >> basically tampa bay they call it sink hole alley. if you're a home buyer looking to relocate, you definitely need to think about that. >> reporter: florida law requires insurance to cover
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catastrophic ground collapse. the building has to be condemned. for minor damage you have to add that to the policy. sink hole insurance claims submitted between 2006 and 2010 was $1.4 billion. the company has been fixing sing holes for 25 years and done over 45 hundred jobs. business has picked up lately he says. >> there is over 100 contractors in the state of florida that do the same type of work. it's a big industry in florida. >> reporter: you would think images like this would drive homeowners and investors away, but one who escaped this disaster says he's keeping other timeshares in florida. >> that's nature. you can't kick nature to the curb. it could happen in your backyard at home. you never know. >> reporter: sinkhole activity has been picking up in the past years in florida.
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some blame over developments, as builders dig into ground that's been unstable for thousands of years. for "nightly business report," i'm diana olick in florida. sea world took a dive. the theme park operator without with weaker than expected profits. revenues soft and the company sees full year revenue below. stock finished the day a fraction lower at 36.31 but then it dropped even more after hours. as you see there. a former employee of herba life souped, it's an investigation into a 2011 safety issue. the nutritional supplement company found tiny pieces of metal in diet shakes. the problem was resolved but the former employee remained concerned. none of the tainted shakes reached consumers. the stock fell 2.5% today to
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$64.62. a shot in the arm for glaxo smith kline could see sales of nearly $1 billion by the year of 2017. shares of glaxo rose to $52. a drug driving shares at elih lily. the lung cancer drug improved overall survival rates. lily expects to sup mitt a marketing expectation before the end of 2014. shares jumped 3% closing at $54.96. hospitals getting bigger, 105 deals last year alone doubled the rate of just three years prior, according to sources sited in the new york times today, so why the wave of deals? and what does the surge in super hospitals mean for consumers
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like you? frank morgan is a healthcare analyst. mr. morgan, good to have you with us. why are hospitals merging at the pace they are? >> in one word uncertainty. the current operating environment is difficult. you see weak up laization trends and pressure and the hospital business can have a significant effect on your profitability. longer term, other uncertainty is for a lot of these hospitals merging is the unserptties related to healthcare reform, new payment models, delivery models, uncertainties bring risk and if you're a not for profit hospital with thin chapelizat - capitalization that could forge it. >> you would see hospitals not wanting to get bigger but be smaller and nimbler to react and do more for consumers why are we seeing the opposite?
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is bigger better? >> there is diverse jens. not for profit is more fearful and skeptical of health care reform than for profit. the organiargument for being las scale, the opportunity to lower cost because we have a lot of reimbursement pressure out there today. being part of a more efficient organization, having access to resources to deal with these changes, reimbursement changes, delivery model changes, those are why the not for profit would want to merge. >> bigger hospitals, i take it, have a kind of pricing power from scale, pricing power with the device makers, with drug companies and so on and so forth. are bigger hospitals, and man, i was in a big one a few weeks ago, are they more quote efficient? >> certainly i think for certain clinical procedures, absolutely advantages with size. over time, payers want to
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negotiate and contract with those most efficient providers. if you're larger and more efficient you would certainly be in a better competitive position and to win business. >> you heard our story at the top of the program talking about a big airline merger that's been blocked on the grounds that's anti competitive and doesn't give consumers as many choices. can't the same be said for hospital mergers that will raise possible fees for the consumer? >> that natural, talking about healthcare being a large business. when you hear those issues, it is very, very market specific. i don't think it would be accurate to over lay the example of the airline industry there because market dynamics are unique to those individual markets. when you think about consolidation today a lot of it is defensive and trying to lower cost because there are rate pressures out there that providers are seeing and in the future with the focus of healthcare reform being accessed
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but reducing cost of the system, there will be a lot of the behavioral changes and system changes. >> frank, a lot of changes happening in the medical business, and you helped us through them. thank you very much. >> thank you. >> frank margin with rbc capital markets. coming up, the house that feels nice. we'll take you unside the university of oregon's state of the art football center funded by nike's chairman. but first a look at how commodities, currencies and treasuries performed today.
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it takes a lot of pmoney to attend college and more to support a division one team and nothing illustrates it than the brand-new state of the art 68 million dollar facility and the billionaire alumni that paid for it. >> reporter: from the out side it looks like a mysterious black shape shies and inside, television screens everywhere with italian leather, marl lined showers, hand woven rugs from nepal. some call it the death star but maybe the duck star, the house that phil built, phil knight. >> it's a super hero. 55, 65-inch tvs in the lobby and takes your breath away. >> reporter: locker room with bacteria resistant surfaces and
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lockers that have helmets and a special hot tub for coaches and fuse ball tables for players, three practice fields, 170-seat auditorium and a 25,000 square foot weight room. >> you want to put sweaty men on italian furniture and nepal rugs, i don't know. >> they treat it well and are appreciative and know how to take care of it. >> reporter: it's over the top but enough to put oregon over the top and allow the school to win a bcs championship? oregon is a runner up and now some nicknamed this the university of nike, if money can buy the best, the duck haves no excuses. the pressure is on the new head coach and star quarterback. >> we don't talk about the national championship except for one time a year and we've done that and now it's about going to work. >> reporter: the ducks are
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penalized for recruiting violations and how to manage a lucrative enterprise while trying to educate and graduate armature athletes. rob mullins supports a change. >> we're proponents of a stiep end that goes above and beyond because we think they do need a little extra money, and that's something on the table. >> reporter: in the meantime, the duck's star may not help oregon win it all now but maybe in the future. because if colleague recruiting at an arm's race, this is a nuclear weapon. and that's just the practice facility and the team accommodations. it's not even the stadium. >> what part did you like the best? >> i like the ferrara leather seats in the theater and 55-inch screens, but a lot of money. >> let's hope they win that better win. >> a new coach and jane wells a big usc alumnaalumni so she doe
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want them to win. nbr.com, click on the link to submit questions and don't forget to include where you're from. >> that's nig"nightly business report" for tonight, i'm susie gharib thanks so much. >> i'm tyler mathisen, we'll see you back here tomorrow night, wednesday. "nightly business report" has been brought to you by. >> sailing through the heart of historic cities and landscapes on a river, you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort.
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